How much is the American paper dollar worth?

Answer 1

That's not a simple question to answer because all American currency, like almost all world currency today, is backed by the stability of the governments that issue it rather than by a controlled commodity such as some kind of precious metal.

A paper dollar is no different from 4 quarters or 100 pennies; it represents a certain amount of buying power both within the US and against other currencies, so you have to ask how its value is related to purchasing power over time and/or versus the purchasing power of other currencies, which are complex questions.

A more economically-grounded question to ask is how many hours a typical worker has to put in to buy a market basket of goods. So for example, if a worker in the 1930s made only $20 a week but someone now makes $1000 a week are they really earning 50 times as much? Not really, because prices have also increased. But if that 1930s worker needed 10 hours of work a week to feed his family and the person in the 2010s needs only 8 hours a week to feed hers, the modern worker is better off even though they're being paid in inflated dollars.

On the other hand a fixed investment such as a pension can and will be ruined by that same inflation - if that 1930s worker left his wife a pension paying $10 a week, and she's still getting that amount today, it IS worth only 1/50th because $10 buys much less in absolute terms.